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The Comcast-Netflix Deal May Not Be a Bad Thing After All

Taylor Schilling in the Netflix original series Orange is the New Black. Image: Netflix

Netflix is now paying Comcast to get a little bit closer to the people using its broadband internet service, and many news outlets have portrayed this as the death knell for net neutrality, the notion that internet service providers shouldn’t treat some traffic differently than others. But smaller internet media companies — the next wave following in the footsteps of Netflix — don’t see it that way.

Just ask Scilla Andreen, the CEO of IndieFlix, an online channel for independent video producers. She’s excited by the deal. “There are always the Chicken Littles of the world. [But] the sky is not falling. Netflix is demonstrating how to be efficient,” she says, before tipping her hat to the company’s swashbuckling CEO. “I think Reed Hastings is a trailblazer.”

Certainly, the Netflix-Comcast deal is a big change in the way the internet works, and the critics are right that it could represent a new shift in power towards big ISPs, big media companies, and prominent web operations like Netflix. We could see a situation where only deep-pocketed companies can pay for the sort of access Netflix now has. And let’s not forget that Comcast is also a TV and movie corporation that competes with companies like IndieFlix and Netflix. It can stream TV and movies over its own network however it wants.

But the deal doesn’t have to be a bad thing. The real implications of the agreement won’t be clear until we learn whether up-and-coming players like IndieFlix are shut out of the picture — whether they end up needing direct access to an ISP like Comcast and whether they can play for it.

Red Carpet Treatment?

In the past, media companies like Netflix gained access to ISPs through various middlemen. They could plug into an ISP like Comcast through “transit providers” — networks deep inside the internet. Or they could store certain content close to internet subscribers using what are called content delivery networks, or CDNs. Basically, CDNs operate machines inside an ISP like Comcast, and anyone can pay to put content on these machines. But now, growing media companies like Netflix and Google’s YouTube — companies that are moving unprecedented amounts of video — are changing the equation.

In the last couple of years, Netflix and Google have become so big that they’ve started building CDNs of their own. They do this by installing their own servers inside the data centers operated by various ISPs and other network providers. According to estimates by Deepfield Networks, as much as 60 percent of Netflix traffic comes from Open Connect CDN servers which are already in many of the nation’s ISPs, but (until now) none of the large consumer service providers. The smaller ISPs don’t charge the company for this privilege. They’re happy to give up a little bit of space in their data centers in order to make things better for their consumers. But Comcast is a different matter.

Comcast wants Netflix to pay for direct access to its network, and Netflix is now paying. It has to. Its service is starting to slow down on Comcast’s network, and it needs direct access to ensure that things improve. The question is whether others can afford to do this. Nobody really knows much about the Netflix-Comcast deal, and it’s not clear whether smaller players such as IndieFlix can swing similar deals, or if they’ll even want to. They can already get their content into Comcast’s data centers, thanks to CDN companies such as Akamai.

Specter of Regulation

David Fannon says he’d like to get direct access to Comcast’s network too, but he doesn’t know if that would be possible. “Does anybody know what they paid and what the deal is essentially?” says Fannon, an executive vice president with Screen Media Ventures, the parent company of Popcornflix. “What is the real deal? I don’t know. That’s what I find interesting.” Comcast didn’t respond to a request for comment on this story. But it could become a gatekeeper for internet media companies.

The saving grace may be the threat of government regulation. Comcast is extremely large. It has a poor reputation for customer service. And it’s the kind of company that people love to hate. But if it starts playing games with media companies and treating them unfairly, the hatred will escalate. And that could lead to government regulation. Right now, this isn’t what Comcast wants, and it not what other ISPs like Verizon and AT&T want.

“I think this will be a self-regulating thing,” says Jeff Lawrence, whose company, PlayOn, makes software that links streaming video on personal computers to TV devices such as the Roku. “Comcast and Verizon know that if they start playing those games, they’re going to push the voices to be louder to create legislation.”